The Supreme Court ruled that lower courts cannot alter arbitral awards using reasons unrelated to the dispute or unsupported by the record under section 34 of the A&C Act.



Date of Judgment- 4th January 2024

CORAM: Justice Abhay S Oka and Justice Sanjay Karol

Facts of the Case:

The case began with Mr. S.V. Samudram, a registered Class II Civil Engineering Contractor, securing a contract from the Karnataka State Public Works Department to construct the office and residence of the Chief Conservator of Forests at Sirsi for Rs. 14.86 Lakhs. Disputes arose regarding delays, non-supply of drawings and designs, and delays in material supply, leading to arbitration. The Arbitrator awarded amounts against several claims made by the Claimant-Appellant, totaling Rs. 18,06,439/- along with interest.

Following the arbitration, the Respondent filed a petition under Section 34 of the A&C Act, challenging the arbitral award in the trial court. The Civil Judge, Sirsi, modified the award, reducing the awarded amount significantly, citing reasons such as minimal distance change in site, lack of evidence for claims, and excessive arbitration costs. This decision was then contested in the High Court.

The High Court upheld the modifications made by the trial court, dismissing the appeal of the Claimant-Appellant. The court deemed certain aspects of the arbitrator’s decision as arbitrary and contrary to public policy, particularly highlighting issues with the estimation of costs and allowances for delays.

Unsatisfied with the decisions of both the trial court and the High Court, the Claimant-Appellant appealed to the Supreme Court. The appellants challenged the modifications made to the arbitral award, arguing that the reductions were unjustified and that the reasoning provided by the lower courts was flawed. They sought a review of the decisions, aiming to reinstate the original award granted by the Arbitrator.

Laws Involved:


Issue framed by the court:

Whether the High Court was justified in confirming the order dated 22nd April, 2010 under Section 34 & 37 of the Arbitration & Conciliation Act, 1996?

Courts judgment and analysis:

The court expressed concerns regarding the fidelity of the lower court’s judgment to the text of the statute, particularly noting a lack of clarity on the grounds for intervention under Section 34. It criticized the lower court for engaging in a re-evaluation of the matter and modifying the arbitral award without sufficient basis, particularly in the absence of any indication that the award contravened public policy.

The court observed that the arbitral award had thoroughly considered the evidence and provided reasoned decisions on each claim, with no objections raised during the arbitration proceedings. It deemed the arbitrator’s decisions plausible and found the lower court’s reasons for interference to be extraneous, contradictory, and even scandalous. The court highlighted instances where the lower court appeared to substitute its views for those of the arbitrator, which it deemed impermissible under Section 34.

Moving to the analysis under Section 37, the court emphasized the limited scope of judicial interference with arbitral awards and cited precedents to underscore this point. It criticized the lower court for seemingly disregarding the restrictions imposed by Section 34 and engaging in an independent assessment of the merits of the award. The court noted that the lower court’s reasoning lacked adequate justification and failed to adhere to the statutory scheme of the A&C Act.

Regarding the issue of interest, the court referred to relevant case law and concluded that the claimant was entitled to interest at the rate determined by the arbitrator. It criticized the lower courts for reducing the interest rate without legal basis and exercised its powers under Article 142 to ensure substantial justice by awarding interest at a specified rate.

In conclusion, the court set aside the judgments under both Section 34 and Section 37, restoring the original arbitral award and directing the concerned party to expedite payment. It emphasized the importance of adhering to the statutory provisions and ensuring proper judicial scrutiny of arbitral awards.

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Written by- Aditi

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